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We expect Nokia Corporation (NOK - Analyst Report), the world’s leading mobile chipset developer, to beat expectations when it reports fourth-quarter 2013 results, before the market on Jan 23, 2014.

Why a Likely Positive Surprise?

Our proven model shows that Nokia is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: The Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +33.33%. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Nokia currently has a Zacks Rank #2 (Buy). Note that the stocks with Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

The combination of Nokia’s Zacks Rank #2 and +33.33% Earnings ESP makes us confident of a positive earnings beat.

What is Driving the Better-Than-Expected Earnings?

Nokia’s Lumia flagship device business started witnessing rising demand with 40% year-over-year rise in shipments. Moreover, launch of different mix of handsets targeting both high and low-end markets will continue to drive mobile phone sales for the company while moving ahead.

A huge patent portfolio coupled with the cost-cutting measures implemented by Nokia will not only boost its margins but will also generate incremental cash flows in the upcoming quarters.   

In the reported quarter, the company achieved operating profitability for the fifth time consecutively. Furthermore, Nokia decided to extend its Here Drive+ and Here Transit mapping application to all smartphones running on Microsoft Corporation’s Windows 8 platform.

In Sep 2013, Microsoft decided to acquire Nokia’s handset business for $7.2 billion (5.44 billion euros). The deal is expected to close by the end of the first quarter of 2014.

Other Stocks to Consider

Other companies you may consider on the basis of our model, which have the right combination of elements to post an earnings beat this quarter are as follows:

SBA Communications Corp. (SBAC - Snapshot Report) has Earnings ESP of +150% and carries a Zacks Rank #2 (Buy).

Equinix, Inc. (EQIX - Analyst Report) has Earnings ESP of +6.58% and carries a Zacks Rank #3 (Hold).

American Tower Corp. (AMT - Analyst Report) has Earnings ESP of +6.38% and a Zacks Rank #3 (Hold).

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